A big subsidy, a quick vote and a blind leap on electricity

Saed Hindash/The Star-LedgerLS Power Development LLC wants to build a power plant in the home district of Senate President Steve Sweeney.

By Tom MoranOne nice thing about New Jersey is that politicians often will admit it when they really don’t have a clue.

Take the latest mischief in the Senate, a bill that would provide a generous dose of corporate welfare to an energy company that wants to build a power plant in the home district of Senate President Steve Sweeney.

The lucky company, LS Power Development LLC, is guaranteed a base payment for 15 years, no matter what happens in the energy market. With Jersey ratepayers on the hook, by law, the company will be able to get financing for a project that investors would otherwise not go near.

So what will those subsidies cost? Is it really anything like the $1 billion that critics are suggesting? And what impact will this move have on electric bills?

“I don’t really know,” Sweeney says. “I have to check into that.”

Keep in mind this bill is scheduled for a final vote in the Senate tomorrow. We know this is a big move. We just don’t know if it will help or hurt. Onward!

Yes, it’s possible a new power plant will drive down electricity costs by increasing supply, as the state Rate Counsel hopes. It’s also possible that playing favorites like this will backfire by chasing away other potential energy investors, as Wall Street analysts warn.

“There are different theories, but I haven’t seen any actual numbers,” says Sen. Kip Bateman, a co-sponsor of the bill.

Think about that. The Senate had one hearing, and because Sweeney wants it, no one is giving it serious scrutiny before tomorrow’s vote. This rush is so reckless that even the sponsors have jitters.

“I’d ask the Assembly to be careful,” Bateman says. “It’s like a foreign language to me, so I do want the experts to weigh in. We have an opportunity for this to be a better bill.”

Believe it or not, the smarmiest part of this bill is the blind leap, with the fate of your electric bill hanging in the balance.

The slippery part is that it was greased from the start to benefit LS Power. Instead of opening this to a competition, it was designed to ensure that this particular company would get the subsidy.

“I’m not hiding that,” Sweeney says.

The bill doesn’t actually name LS Power, because that would break all kinds of rules. Instead, the Senate is playing an old game that every bid-rigger knows — you put in conditions that only your friend can meet.

In this case, the subsidy is targeted for companies that already have clean-air permits, that can commit to having the plant up and running within about three years, that will build in an economic development zone, and that plan combined-cycle plants that run on natural gas.

Wouldn’t you know it — LS Power meets each condition.

“There’s no way the rest of us can compete for this,” says John Shelk, the president of the Electric Power Supply Association, a coalition of power companies. “If you don’t have a project that’s ready to go when the ink is dry, you couldn’t possibly qualify.”

The Senate bill would allow one more firm to get a piece of this action. It authorizes subsidies for 1,000 megawatts of power, and the LS Power project would take 620 of that. Woodbridge Mayor John McCormac is pushing for an amendment that would make more room for a big project in his town.

And there lies the problem. Once you give a subsidy to one power company, no one else will build without one. Ask yourself this: Is an energy market shaped by politicians likely to be more efficient than the one shaped by the open market?

Put another way, are politicians likely to favor the company that has the best project, or the one that promises to locate in their district. Or hire their friends. Or make big political contributions?

Sweeney says the plant will have green benefits, and create needed jobs in his South Jersey district, one of the poorest in the state. Who can argue with that?

But the impact of this bill could be much wider. It takes a big step back toward a regulated energy market, with political thumbs on the scale. And that should make us all jittery.